Energy Sector Faces Financial and Environmental Challenges
The energy sector plays a strategic role in Indonesia's economy because it includes industries such as oil and gas, coal, electricity, renewable energy, and energy-related services. At the same time, the sector faces considerable environmental pressure arising from exploration, production, distribution, and energy consumption activities.
These activities can generate greenhouse gas emissions, liquid and solid waste, and environmental degradation. Financial performance in the energy sector is also highly sensitive to global commodity prices and broader economic conditions.
Rahman and Pandaya's research highlights the importance of examining sustainability practices specifically within the energy sector because companies in this industry face greater environmental pressures while their financial performance can fluctuate significantly due to global commodity price movements.
This situation makes environmental management increasingly important. Companies are not only expected to generate profits but are also required to demonstrate how environmental costs and impacts are managed and disclosed transparently.
Green Accounting Linked to Financial Performance
Green accounting is an approach that incorporates environmental activities and costs into a company's accounting and reporting system. In this study, green accounting was measured using the GRI 300 environmental disclosure index.
Meanwhile, environmental performance was measured using PROPER ratings issued through Indonesia's environmental performance assessment program. The rating system consists of five categories: Gold, Green, Blue, Red, and Black.
Financial performance was measured using Return on Assets, or ROA. This ratio indicates a company's ability to generate profits by utilizing its assets.
40 Companies and 240 Observations Analyzed
The researchers used secondary data obtained from companies' annual reports, audited financial statements, and sustainability reports. The initial population consisted of 62 energy-sector companies listed on the Indonesia Stock Exchange during 2019–2024.
Companies were selected based on several criteria, including consistent listing throughout the observation period, availability of complete annual or sustainability reports, disclosure of green accounting and environmental performance information, and the absence of delisting, mergers, or acquisitions.
After the selection process and outlier screening, the researchers obtained a final sample of 40 companies with 240 firm-year observations. The data were analyzed using panel-data regression with the Random Effect Model and processed using EViews 13.
The analysis produced three main findings:
Green accounting has a positive and statistically significant effect on financial performance, with a probability value of 0.0387.
Environmental performance measured through PROPER ratings does not have a significant effect on financial performance, with a probability value of 0.9605.
Green accounting and environmental performance simultaneously do not have a statistically significant effect on financial performance, with an F-test probability value of 0.0888.
The model generated an R² value of 2.02 percent, meaning that the variables examined in the model explain only a small portion of the variation in financial performance. Other factors, including company size, leverage, capital structure, and global energy commodity prices, may play a larger role.
Environmental Disclosure Provides a Positive Signal
One of the most important findings is the positive effect of green accounting on ROA. The regression coefficient was 0.058639 with a probability value of 0.0387.
The researchers found that an increase in environmental disclosure based on the GRI 300 index was associated with an increase in ROA. At the index level, an increase from 0 to 1 was associated with an approximately 5.86 percentage-point increase in ROA. However, this figure needs to be interpreted alongside the relatively low overall explanatory power of the model.
For energy companies, the finding suggests that green accounting should not be treated merely as an administrative requirement. Environmental cost reporting and disclosure can instead become part of corporate strategy and managerial decision-making.
Rahman and Pandaya argue that environmental transparency can strengthen corporate reputation and investor confidence. Sustainability practices may therefore create economic value when they are genuinely integrated into business strategy rather than treated simply as reporting obligations.
Environmental Performance Alone Does Not Guarantee Financial Gains
Unlike green accounting, environmental performance measured through PROPER ratings was not found to have a significant effect on ROA.
The researchers offer several possible explanations. One is that PROPER uses only five rating categories, meaning that differences in environmental performance may not be captured as precisely as they are through the continuous GRI 300 disclosure index.
Another possibility is that the financial benefits of stronger environmental performance may take longer to appear. Improvements in environmental compliance could eventually contribute to cost efficiency, easier licensing, reduced social conflict, and stronger reputation, but these benefits may not immediately be reflected in annual financial performance.
The energy sector's strong exposure to global commodity prices may also make short-term financial indicators more sensitive to commodity-market movements than to environmental compliance ratings.
Therefore, companies cannot rely solely on environmental compliance as a strategy for improving financial performance. Environmental initiatives need to be connected with operational efficiency and concrete financial strategies so that sustainability efforts can generate measurable economic value.
Sustainability Needs to Be Integrated into Business Strategy
When green accounting and environmental performance were examined simultaneously, the results did not show a statistically significant effect on financial performance at the 5 percent significance level. The F-test probability value of 0.0888 is relatively close to the 10 percent threshold, but under the study's primary significance criterion, the relationship remains classified as insignificant.
The finding suggests that sustainability practices do not automatically translate into higher profitability. According to the researchers, the relationship may instead occur indirectly through variables such as operational efficiency or profitability.
For energy companies, the implication is clear: green accounting and environmental performance should be integrated into a coherent business strategy focused on long-term value creation.
For investors, environmental disclosure can serve as an additional signal when evaluating a company's prospects. However, environmental ratings should not be considered the sole indicator of corporate sustainability or financial strength.
Author Profiles
Julia Fatia Rahman — Universitas Teknologi Muhammadiyah Jakarta. Rahman is listed as the corresponding author of the article, which focuses on green accounting, environmental performance, and corporate financial performance.
Pandaya — Universitas Teknologi Muhammadiyah Jakarta, co-author of the study examining the relationship between environmental practices and financial performance in the energy sector.
The article does not explicitly provide the authors' academic degrees or detailed individual areas of expertise, so those details have not been added in order to maintain factual accuracy.
Research Source
Article Title: The Effect of Green Accounting and Environmental Performance on Financial Performance on the Indonesia Stock Exchange: A Case Study of the Energy Sector from 2019 to 2024
Authors: Julia Fatia Rahman and Pandaya
Affiliation: Universitas Teknologi Muhammadiyah Jakarta
Journal: International Journal of Management and Business Intelligence (IJBMI)
Volume: 4, Issue 4, 2026, pp. 733–754
DOI: https://doi.org/10.59890/ijmbi.v4i4.34
Journal Website: https://journalijmbi.my.id/index.php/ijmbi
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